US manufacturing activity unexpectedly expanded in January at the fastest pace since 2022, energized by solid growth in new orders and production.
The Institute for Supply Management’s manufacturing index rose to 52.6 from 47.9, according to data released Monday. Readings greater than 50 indicate expansion, and the latest figure topped all projections in a Bloomberg survey of economists.
Following nearly a year of contraction, the demand-related spike in factory activity is welcome news. Sustained growth would help provide reassurance that manufacturing is on the mend after languishing the past three years.
The ISM report showed a nearly 10-point increase in a gauge of new orders and a firm advance in the production index — both of which indicated the fastest growth in nearly four years. Order backlogs expanded for the first time since 2022, while export orders also increased.
The strength in demand reflected in part a decline in a measure of customer inventories, which contracted by the most since mid-2022. Lean customer stockpiles have the potential of providing more of a tailwind for factory orders and production in the coming months.
Recent government data also indicated solid business investment late last year.
The ISM gauge of factory employment climbed 3.3 points to a one-year high of 48.1, indicating headcount shrank but at a slower pace.
A measure of supplier delivery performance climbed to the highest level since May and indicated manufacturers were facing longer lead times for inputs used in production.
At the same time, the report also indicated that manufacturers are finding little relief from elevated input costs. The ISM prices-paid index climbed in January to a four-month high of 59.
Producers continued to draw down their inventories, though at a slower pace than the month prior.
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